Company Town : NEWS ANALYSIS : NBC Challenge Likely to Slow Fox : Television: Analysts say station owners may be reluctant to sell until the FCC sorts out the network battle.

In the war between NBC and Fox being waged on the battleground of the Federal Communications Commission, the first impact is likely to be a chilling effect on Fox’s plans to purchase TV stations around the country.

NBC has challenged Fox’s planned acquisition of two Fox affiliates, WFXT-TV in Boston and WTXF-TV in Philadelphia. On Friday, NBC filed petitions asking the FCC to deny the transfer of ownership of two NBC affiliates and one ABC affiliate--WVUE-TV in New Orleans, WALA-TV in Mobile, Ala., and KHON-TV in Honolulu--to a separate Fox-related partnership.

Those stations had been acquired, pending FCC approval, by SF Broadcasting, a joint venture between Fox Television and Savoy Pictures. Fox says it is a non-voting partner in the deal, but NBC says Fox is attempting to use the partnership to get around ownership limits.

The question in the NBC-Fox fight is whether Fox, as part of Rupert Murdoch’s Australia-based News Corp., is a foreign-controlled company that is violating longstanding laws against foreign ownership of U.S. broadcasting companies. Ninety-nine percent of the funds used to buy the original station group came from News Corp, but the network maintains that Murdoch, who became a U.S. citizen, has voting control over the stations and de facto control of News Corp.

NBC has filed a petition before the FCC, charging that the stations that formed the heart of the Fox station group violate the law that forbids foreigners from owning more than 25% of a broadcast station’s license. NBC is asking the FCC to bar Fox from owning any new stations or, if it does not take that action, to allow NBC and other station owners to sell parts of their companies to foreign buyers.

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NBC had already challenged the purchase of WLUK-TV, the NBC affiliate in Green Bay, Wis., by SF Broadcasting. The loss of Green Bay, NBC executives acknowledge, was the straw that broke the peacock’s back in deciding to challenge Fox’s ownership. The total purchase price of the four stations is estimated at $267 million.

“The FCC is not going to act on applications for transfer while they’re investigating Fox’s ownership,” said Ted Hepburn, a media broker who has been buying and selling TV stations for 25 years. “Sellers might be reluctant to make a (station) deal with Fox until they see how this thing comes out.”

Besides station acquisitions, Hepburn said, “I would imagine that people who might have tried to get Fox to back them in a non-voting equity way, like the SF deal, also will put their plans on hold.”

Indeed, Hepburn added, SF Broadcasting-type partnerships in general could be affected. “I’ve already had a call from someone who was thinking of structuring a deal similar to the SF deal, expressing concern that the FCC might rule against it.”

Ed Atarino, an entertainment analyst with Dillon Read, agrees. “Potential sellers could have second thoughts and get some contingencies built into the deals,” he said. “It’s like buying a house. There may be some kind of financial adjustments built into the deal to provide compensation to the seller if the deal gets delayed or undone.”

Preston Padden, president of network distribution for Fox Broadcasting, declined to comment on the impact of the FCC’s inquiry on Fox’s pending station buys. But Charles Giddens, managing director of Media Ventures Partners, which is handling some of the Fox deals, said in an interview: “None of our sellers are panicking. Some deals may get delayed because the FCC is reviewing them. But our sellers believe that Fox ultimately will prevail.”

Although the building of the Fox network originally was praised as a way to bring new competition to the broadcast marketplace, NBC and others charge that Fox, now a major competitor, has received special privileges.

“The FCC has consistently granted Fox significant regulatory advantages,” NBC general counsel Richard Cotton said. “NBC is prepared to compete head-to-head with Fox. But fair competition requires that everybody plays under the same rules.”

Fox executives have questioned the timing of NBC’s actions, saying the broadcast networks did not have a problem with Fox until it raided their network affiliates and took NFL football away from the Big Three broadcasters. In documents countering NBC’s challenge, Fox charged, “NBC isn’t concerned about the appropriate application of FCC rules but about the collapse of the old boy’s club that has dominated network broadcasting.”

But Neil Braun, president of the NBC network, said in an interview: “We’re after one thing: a leveling of the playing field. If someone does something against the law and against your interest, don’t you think you should use the law to protect your interest?”

Either way, some industry observers say, NBC could benefit from the FCC inquiry. If the FCC rules to allow foreign ownership, NBC, which has been seeking a minority partner, could be able to look abroad for it.

The FCC is expected to meet Thursday to begin discussing TV ownership rules. Sources say the discussion could send a signal about how deeply a company such as Fox can be involved with a station’s ownership and not count the station against the limit of 12.